Polish Weekly Review, 24 maja 2013

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On fixed income market, we have local data, which can move the market some 3-5bp, and global trends, which can move the market 20bp per day. This week’s most important news was Bernanke’s comment about possibile Quantitative Easing Exit plan. Market reacted with panic selloff in long end bonds, yields went up some 20bp, investors realised that there is a risk for this ‘cheap money forever’ scenario. While we agree with steepening trend this maybe time to think about possible risk on short end of the curve and take profit on long end. Wibors are very low, already pricing fast 2 rate cuts and 9×12 fra at 2.27 is another 50bp lower. Definitelly, ‘no rate cut’ in June would be a surprise and while this in not our base scenario, possible payoff is worth betting on this. Keep in mind that volatility is huge and liquidity is very fragile at the moment.

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